Dolby Laboratories (NYSE: DLB) and Viacom (NASDAQ:VIA) are both mid-cap consumer discretionary companies, but which is the superior business? We will contrast the two businesses based on the strength of their valuation, institutional ownership, analyst recommendations, dividends, profitability, risk and earnings.

Volatility & Risk

Dolby Laboratories has a beta of 0.81, meaning that its stock price is 19% less volatile than the S&P 500. Comparatively, Viacom has a beta of 1.46, meaning that its stock price is 46% more volatile than the S&P 500.

Insider and Institutional Ownership

51.9% of Dolby Laboratories shares are owned by institutional investors. Comparatively, 2.3% of Viacom shares are owned by institutional investors. 43.8% of Dolby Laboratories shares are owned by insiders. Comparatively, 0.7% of Viacom shares are owned by insiders. Strong institutional ownership is an indication that large money managers, endowments and hedge funds believe a company is poised for long-term growth.

Analyst Recommendations

This is a summary of current recommendations for Dolby Laboratories and Viacom, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Dolby Laboratories 0 2 1 0 2.33
Viacom 1 6 5 0 2.33

Dolby Laboratories presently has a consensus price target of $52.83, indicating a potential upside of 4.19%. Viacom has a consensus price target of $43.00, indicating a potential upside of 12.13%. Given Viacom’s higher possible upside, analysts clearly believe Viacom is more favorable than Dolby Laboratories.

Profitability

This table compares Dolby Laboratories and Viacom’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Dolby Laboratories 19.02% 10.25% 8.78%
Viacom 11.04% 30.89% 6.39%

Dividends

Dolby Laboratories pays an annual dividend of $0.56 per share and has a dividend yield of 1.1%. Viacom pays an annual dividend of $0.80 per share and has a dividend yield of 2.1%. Dolby Laboratories pays out 28.6% of its earnings in the form of a dividend. Viacom pays out 22.0% of its earnings in the form of a dividend. Both companies have healthy payout ratios and should be able to cover their dividend payments with earnings for the next several years. Dolby Laboratories has raised its dividend for 2 consecutive years. Viacom is clearly the better dividend stock, given its higher yield and lower payout ratio.

Valuation & Earnings

This table compares Dolby Laboratories and Viacom’s top-line revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
Dolby Laboratories $1.07 billion 4.86 $340.22 million $1.96 25.87
Viacom $13.17 billion 1.17 $2.92 billion $3.64 10.54

Viacom has higher revenue and earnings than Dolby Laboratories. Viacom is trading at a lower price-to-earnings ratio than Dolby Laboratories, indicating that it is currently the more affordable of the two stocks.

Summary

Viacom beats Dolby Laboratories on 9 of the 16 factors compared between the two stocks.

Dolby Laboratories Company Profile

Dolby Laboratories, Inc. designs and manufactures audio and imaging products for the cinema, television, broadcast and entertainment industries. Its products for cinema include Digital Cinema Servers and Cinema Audio Products, and broadcast and other include Dolby Conference Phone and Other Products. It offers services to support theatrical and television production for cinema exhibition, broadcast and home entertainment, including equipment training and maintenance, mixing room alignment and equalization, as well as audio, color and light image calibration. Its technologies include Advanced Audio Coding and High Efficiency Advanced Audio Coding, Dolby AC-4, Dolby Atmos, Dolby Digital, Dolby Digital Plus, Dolby TrueHD, Dolby Vision, Dolby Voice and High Efficiency Video Coding. It distributes its products in over 80 countries. Its technologies are incorporated in offerings in various end markets, such as the broadcast, Personal Computer, mobile, consumer electronics and other markets.

Viacom Company Profile

Viacom Inc. offers global media brands that create television programs, motion pictures, short-form content, applications, games, consumer products, social media experiences and other entertainment content. As of September 30, 2016, the Company offered its services for audiences in more than 180 countries. The Company operates through two segments: Media Networks and Filmed Entertainment. The Media Networks segment creates, acquires and distributes programming and other content for audiences The Media Networks segment provides entertainment content and related branded products for advertisers, content distributors and retailers. The Filmed Entertainment segment produces, finances, acquires and distributes motion pictures, television programming and other entertainment content under the Paramount Pictures, Paramount Vantage, Paramount Classics, Paramount Animation, Insurge Pictures, Nickelodeon Movies, MTV Films and Paramount Television brands.

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